ABOUT SEAN STANNARD-STOCKTON

Sean Stannard-Stockton is the president and chief investment officer of Ensemble Capital Management, located in Burlingame, CA, midway between San Francisco and Silicon Valley. From 2006 through 2012, Sean authored the Tactical Philanthropy blog and wrote regular philanthropy columns for both the Financial Times and the Chronicle of Philanthropy. In 2012, Sean officially ended the blog to focus on growing Ensemble Capital.

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Alumni Giving Trends

August 28, 2007 – 2:32 pm

Traditionally most donors have given to causes to which they have a personal connection. They give to the hospital where they had a successful surgery. They give to an at-risk youth shelter because they grew up in a broken home. They give to the college they went to because they feel like it did a great job preparing them for life.

Part of what characterizes the donors I call Tactical Philanthropists, is their embrace of the idea that they want their gifts to be effective. This desire for effectiveness may lead them to organizations that they do not have a prior connection with. But the effectiveness of these donations, the “social return on investment” that they get from these gifts, is the goal that they are pursuing.

Laurence Lee is the sort of alumnus that the University of Chicago craves, with two degrees from the school and plenty of money that he is looking to give away. But when Chicago solicits Mr. Lee for donations, he says he thinks to himself, "What do they need me for? What difference can I make when they already have billions?"

Instead of contributing much to Chicago, where he earned bachelor’s and law degrees, Mr. Lee, who is retired, gave $6.6 million to a school he never attended: Lake Forest College, a small liberal-arts school located in the Chicago suburb where he lives. Its endowment is about $75 million, just over 1% of University of Chicago’s $6.1 billion.

"My money means a lot more to Lake Forest," he says.

Mr. Lee is among a rising cohort of philanthropists who are eschewing their richly endowed alma maters in favor of schools with meager resources. Turned off by massive endowments at the nation’s top schools, they seek to make a greater impact at less-wealthy institutions.

8 Comments

Reminds me of a story I had commissioned when I was at Worth.com in early 2000. Called “Melodious Intent,” it told about how a regular (and major) giver to Yale decided one year NOT to give to the school’s capital campaign. Instead, he found out that despite Yale’s riches, the music school was starving for funds and couldn’t afford to replace its leased Yamaha pianos. So this person made a gift that was earmarked just so the school could lease new pianos. That triggered someone else to give for the same purpose too. Sweet music to the school’s ears.

This is similar to the response we get from donors who seek to level the playing field. They recognize that they can make a difference right now in a child’s life and future by sponsoring the child for $12,000. St. Philip’s Academy is a K-8 independent school in Newark, NJ which prepares inner city children to excel at selective secondary schools. Graduates currently attend schools such as St. Paul’s (NH), Milton Academy (MA), Lawrenceville (NJ), Choate (CT), and colleges such as Johns Hopkins, Carnegie-Mellon, Cornell, Rutgers and Vanderbilt.

I have tried to convince donors for years that a $1MM gift to an elementary school, where kids spend as many as 11 or 12 years of their school careers, will have a transformational impact. Increasing a $4MM endowment to $5MM is significant. That same gift to Harvard gets lost in the shuffle, and the chances of your kids attending your alma mater are very slim. Yet so many colleges are conducting successful multi-billion dollar capital campaigns – it never ceases to amaze me. Turn your attention and philanthropy to elementary schools, where the foundation is laid for those college-bound kids. St. Philip’s (comment above) is a great example of a worthy school doing wonderful things for bright kids in Newark.

What are the real reasons behind Mr. Lee’s gift other than that it means “a lot more”? I believe that this highlights a significant irrational behavior in the nonprofit funding world. Money does not flow to the highest performing organizations that can make the best use of them.

Passing no judgment on the quality of either school, but we will assume for example that Chicago is a higher performing organization that Lake Forest, why turn away an opportunity to donate based solely on the size of the existing endowment?

The for-profit analogy would be to eschew investing in a high performing blue chip company because the money means more to a struggling enterprise – not a good way to build a track record.

If Mr. Lee and others take a good hard look at their heavily endowed alma maters, and then at a similarly high performing alternative and decide that the two are equally matched in many ways, terrific. However, my guess is that this is occurring less than one would hope and has negative implications for the sector as a whole. It highlights the emotional and subjective way that funds flow in the nonprofit world – and not only in higher education

The last line of the article is telling “You can see it happen, and you get some credit for it.”

Tom Hooper, for those donors who have no personal connection to St Philip’s, what motivates them to make a gift to an organization where they don’t know anyone and they don’t know any of the students? And how do they find you?

Tom Hyland,
I agree. It is similar to the idea of “why vote?” since one vote “doesn’t have much impact”. The key issue is the “marginal value” of the donation. Even the most high achieving organization, may not be able to put new donations to good use is they have plenty of capital. Even low performing orgs may be able to put new capital to great use (maybe their lack of capital is why they underperform).

But currently we have no metrics that I have ever seen that are anything close to “amount of good produced from new donations”.

Our donors learn about us from their friends and colleagues. They join us at social gatherings hosted by our friends, at speaking engagements at Rotary Clubs and at their places of worship. They learn about St. Philip’s students’ commitment to public service and to protecting the environment through local and national print and broadcast media.

They contribute to this K-8 independent school in Newark, NJ’s Central Ward for several reasons. They recognize that children can become “turned on” to school by first or second grade. Likewise, without the proper rigorous, yet loving environment, children can become “turned off” to school in the first or second grade.

They realize that children benefit greatly from small classes (18/class), and individualized attention from dedicated teachers with degrees from colleges such as Williams, UVA, Harvard, Smith, Amherst, UPenn and Bryn Mawr.

Often, our contributors seek to be part of something bigger than themselves. I can’t tell you the number of times our donors have thanked me for giving them the opportunity to help our children. They realize that not only can these children achieve at the highest levels academically and throughout their lifetimes in their careers. They understand that St. Philip’s model can be replicated in other cities, and that many more inner city students can live the American Dream. If America is to continue to lead in the global economy, we have to prepare both traditional and non traditional students to compete.